University-affiliated Technology and Start-up Gap Funding challenge Venture Capital

By
Hayden Richards

Is Venture Capital Dead? Venture Capital has always been an arena of investment for dreamers and the gullible. Venture capitalists and entrepreneurs can get caught into developing eye-catching products, amd the need to ‘disrupt’ the industry. But they often forget the main point of the exercise – ensuring profitability. A Cenak blog was more optimistic in pondering the question:

“Perhaps the venture capital model is evolving into a newer, hopefully more efficient, version of itself?  One where investors are more patient and cautious, and willing to trade off fast and furious returns for smarter and more fundamentally sound business models?  Or perhaps, venture capital is shifting away from a its traditional approach and evolving into a model where smaller rounds dominate and where VC firms work closely with entrepreneurs, such as the model successfully implemented by Tandem Entrepreneurs”

The truth is, that venture capital as a legitimate capital source for early-stage, developmentally-rigorous technologies and start-ups, is largely dead and it’s not coming back. This movement by traditional capital sources, like venture capital and angel investment, to later stages is leaving behind a “valley of death” for future innovation. As a result, research universities, often a source of this innovation, are offering a solution through translational research, proof of concept, and start-up gap funding programs. These gap funds and their impact on our innovation capability are detailed in a new, online resource called Mind the Gap a resource for those interested in university-affiliated translational research, proof of concept and pre-seed technology and start-up gap funds

Mind the Gap, an initiative of innovosource, has tracked the evolution of these gap funds at nearly 100 research universities over the past decade and is focused on supporting current and aspiring fund managers in their program development efforts and investors or corporations with interest in connecting with university technologies and start-ups. Innovosource is an awareness firm that works with research universitiesand their key innovation partners which includes high-tech companies, early-stage investors and government agencies to develop new opportunities for interaction and knowledge exchange. 

Founded by Jacob Johnson, his primary motivation in founding innovosource was to act as a partner to organizations in early-stage innovation to develop topics and services that may be cost prohibitive, difficult, or too disruptive to explore internally. Prior to innovosource,  Jacob was a consultant to the DARPA Microsystems Technology Office, and a founding member of three, technology transfer, business development and corporate relations units at the University of Minnesota.

One outcome of this initiative is a first-of-its-kind report that:

  • positions gap funds into the new early-stage capital continuum with other traditional sources of early stage capital (venture, angel, public funds)
  • details the structure and management of these programs to target specific needs along the commercialization pathway
  • expands on how gap funding is impacting the innovation, economic development, and capital landscape

Innovosource are also piloting a new initiative, Pardon the Disruption, which seeks to create robust university innovation plans based on identified current and future technology and business challenges at high-tech companies and advanced government agencies. In addition, partners will receive assets maps of their university in each interest area that they can use to internally catalog resources and utilize in future relationships with other companies and agencies.

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